Smith Industries uses a cost system that carries direct materials inventory at a standard cost. The controller has established these standards for the cost of one basket (unit): NOTE: All dollar amounts are rounded to whole dollars and shown with "$" and commas as needed (i.e. $12,345). For the variance conditions, your answer is either "F” (for Favorable) or "U” (for Unfavorable) - capital letter and no quotes. Smith Industries made 3,000 baskets in July and used 15,500 pounds of material to make these units. Smith Industries paid $39,370 for the 15,500 pounds of material. Complete the following table of variances and their conditions: Variance Variance Amount Favorable (F) or Unfavorable (U) Material Price Material Quantity Total DM Cost Variance
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
Smith Industries uses a cost system that carries direct materials inventory at a
NOTE: All dollar amounts are rounded to whole dollars and shown with "$" and commas as needed (i.e. $12,345). For the variance conditions, your answer is either "F” (for Favorable) or "U” (for Unfavorable) - capital letter and no quotes.
Smith Industries made 3,000 baskets in July and used 15,500 pounds of material to make these units. Smith Industries paid $39,370 for the 15,500 pounds of material.
- Complete the following table of variances and their conditions:
| Variance | Variance Amount | Favorable (F) or Unfavorable (U) |
|
Material Price |
|
|
|
Material Quantity |
|
|
|
Total DM Cost Variance |
|
|
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